Japan Inc. poised to rake in record profits this fiscal year

Listed Japanese companies are projected to rake in around 29 trillion yen this fiscal year.

TOKYO -- Japanese listed companies this fiscal year will likely match or surpass their record total profits from fiscal 2007, underscoring their recovery from the financial crisis and the March 2011 earthquake and tsunami.

The Nikkei tallied pretax profits for companies that have released results for the year ended March 31 as of Wednesday, excluding financial and power companies. Total profits swelled 36% last fiscal year and are seen climbing 2% this fiscal year.

Companies tend to play it safe with their estimates, and analysts see room for this fiscal year's profits to top the fiscal 2007 high. For Toshiba, "our profit forecast is a minimum commitment," says Corporate Senior Executive Vice President Makoto Kubo, hinting that it may beat the guidance thanks to semiconductors and other businesses.

Companies that have boosted earnings globally are drawing particular attention. Mitsubishi Heavy Industries is focusing on areas where it can compete worldwide, and it expects its first record profit in 18 years this fiscal year on the back of its strong energy and aviation-related businesses.

Others are using acquisitions to boost their bottom lines. Daikin Industries purchased U.S. air-conditioner maker Goodman Global Group, expanding its American sales channels. One in six companies, including Daikin, is forecasting record profits this fiscal year.

Some are having trouble getting back on their feet, such as Sony, whose TV business is still anemic.

The main reasons for slower overall growth expected this fiscal year are the end of the boost from the weak yen and the impact of last month's sales tax hike. The latter "will cause a profit decline of up to 10 billion yen," says Isetan Mitsukoshi Holdings President Hiroshi Onishi.

But forecasts point to a recovery before the fiscal year is out. Overall profits are seen sliding 4% in the first half, but rising 7% in the second half.

Some businesses are likely to be hobbled by high labor costs due to a shortage of workers. "Wages for mold makers in the Tohoku area are 2.5 times what they were before the earthquake," says Shozo Harada, executive vice president at construction company Obayashi.

These obstacles are not the only reasons for the slowdown. Businesses are making investments in future growth. Toyota is spending more on development of next-generation cars, while Fujitsu will raise capital spending by 20% this fiscal year.